Bank Income Smoothing, Institutions and Corruption

Research in International Business and Finance

28 Pages Posted: 14 Mar 2019 Last revised: 21 Sep 2020

See all articles by Peterson K Ozili

Peterson K Ozili

Central Bank of Nigeria; Central Bank of Nigeria

Date Written: 2019

Abstract

This study investigates bank income smoothing, focusing on the effect of corruption on the extent of income smoothing by African banks. I find that banks use loan loss provisions to smooth positive (non-negative) earnings particularly in the post-2008 crisis period and this behaviour is reduced by strong investor protection. Also, I find that banks in highly corrupt environments smooth their positive (non-negative) earnings as opposed to smoothing the entire profit distribution. Finally, cross-country variation in bank income smoothing is observed. The findings have implications.

Keywords: Loan Loss Provisions, Earnings Management, Investor Protection, Corruption, Income Smoothing, Banks, Profitability

JEL Classification: G21, M41, O55, N27, K41

Suggested Citation

Ozili, Peterson K, Bank Income Smoothing, Institutions and Corruption (2019). Research in International Business and Finance, Available at SSRN: https://ssrn.com/abstract=3340669 or http://dx.doi.org/10.2139/ssrn.3340669

Peterson K Ozili (Contact Author)

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone
Abuja
Nigeria

Central Bank of Nigeria ( email )

Abuja
Abuja, 09
Nigeria

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